Health Care Reform:

Health Insurance & Affordable Care Act

Supreme Court Set to Hear Pivotal HMO Case

If you have any interest in the fate of the managed care industry in America, you'll want to mark your calendar for Feb. 23 at 10:00 a.m. EST. That's when the U.S. Supreme Court is scheduled to hear the Cynthia Herdrich case.

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Supreme Court Set to Hear Pivotal HMO Case

Jan. 7, 2000 (Washington) -- If you have any interest in the fate of the managed care industry in America, you'll want to mark your calendar for Feb. 23 at 10:00 a.m. EST. That's when the U.S. Supreme Court is scheduled to hear the Cynthia Herdrich case. Herdrich claims she was victimized by her HMO, but that's only the beginning. No mere malpractice lawsuit, industry critics and supporters agree that this action could profoundly affect the way managed care organizations cover some 140 million Americans in the future.

"If we go back to an era where care was unmanaged, 15 years ago, and health care inflation picks up where it left off, you're not going to have 44 million people uninsured in America, you're going to have 144 million people uninsured," Jeffrey Gabardi, legislative director and counsel for the Health Insurance Association of America, tells WebMD.

Specifically, the 1992 case involves a $35,000 malpractice award given to Herdrich on the basis that her physician failed to follow up on evidence she had appendicitis. Ultimately, Herdrich's appendix ruptured, and she developed peritonitis. Herdrich's HMO, the Carle Clinic of Urbana, Ill., appealed the verdict, and the Seventh Circuit court ruled that Herdrich's HMO had breached its basic "fiduciary" responsibility to act in the patient's best interest, because the company's compensation scheme rewarded doctors who saved money on treatment. In other words, was the HMO more concerned about the patient or the bottom line?

"The court of appeals' view that physician incentive arrangements substantially erode the quality of American health care is both historically naive and contrary [to the evidence]," says a brief filed in the Herdrich case on behalf of the American Association of Health Plans, the Health Insurance Association of America, the Association of Private Pension and Welfare Plans, and the U.S. Chamber of Commerce.

The managed care industry has asked the Supreme Court to hear the case in hopes of resolving what has become an increasingly acrimonious national debate over the need to provide essential care vs. the pressure to control rising health costs. The U.S. Solicitor General has filed an opinion supporting the industry.